Frequently Asked QuestionsHow Much Will It Cost to Register an Investment Advisor?

When an individual is considering whether to start a registered investment advisor, a primary concern is how much will it cost to set-up an investment advisor firm. The set-up expenses can vary greatly depending upon whether the firm will need to register as an investment advisor with the U.S. Securities Exchange Commission (“SEC”) or with the state securities regulator, the size of the investment advisor, the complexity of the proposed investment advisor’s business model, and the conflict or potential conflict of interest situations that will exist. An individual looking to register as an investment advisor will not only need to take into consideration the cost involved in the actual investment advisor registration process but will also need to consider the cost of getting the appropriate office set-up and systems in place as well as any staffing related costs.

The first step in starting an investment advisor firm commonly involves establishing or forming the entity (as a corporation or limited liability company for example) that will serve as the registered investment advisor, unless an entity is already in place that will register as the investment advisor. Typically, the formation of the entity will involve hiring an attorney, accountant and/or filing service to assist with determining the best type of entity and/or preparing the appropriate organizational documents. There will also likely be an incorporation/formation fee paid to the secretary of state in order to form the entity. Once the entity has been properly established, the investment advisor registration process can begin.

Each firm registering as an investment advisor will be charged fees by the state securities regulator(s) to register or notice file the investment advisor with the applicable state(s). Each state securities regulator determines its own investment advisor registration and notice filing fees. This registration or notice filing fee is paid at the time the initial application for investment advisor registration is submitted and then again during the last quarter of the calendar year when the investment advisor is required to renew its investment advisor registration or notice filing. These investment advisor registration/notice filing fees vary among state securities regulators and on average range from $50-$500 depending upon the state securities regulator. A list of all state investment advisor registration and notice filing fees can be found on the Investment Adviser Registration Depository’s (“IARD”) website. Click here to access a copy of the list.

The next cost that most investment advisors will likely incur is the investment adviser representative licensing fee charged by the state securities regulator(s). The investment adviser representative licensing process and requirements will vary depending upon whether your investment advisor is SEC or state registered and can vary among state securities regulators. Investment adviser representative licensing fees typically range from $10 to $285 per investment adviser representative each year depending upon the state securities regulator. A list of the investment adviser representative licensing fees by state securities regulator can also be found on the IARD website. Click here to access a copy of the list.

An investment advisor submitting an application for registration will be required to submit the Form ADV through the IARD system. When investment adviser representative licensing is required by the state securities regulator, the request for licensing is made by submitting a Form U4 through the Central Registration Depository (“CRD”) system. An IARD firm system processing fee will be charged to an investment advisor requesting registration with the SEC. The IARD firm system processing fee will vary depending upon the investment advisor’s amount of assets under management according to the following fee schedule:

Under $25 million = $40 IARD firm system processing fee;

$25 million – $100 million = $150 IARD firm system processing fee;

Over $100 million = $225 IARD firm system processing fee; and

SEC Exempt Reporting Advisor = $150 IARD firm system processing fee.

This IARD firm system processing fee is currently being waived for investment advisors requesting registration with the state securities regulators. An investment adviser representative system processing fee of $10 will also be charged for each investment adviser representative submitting a Form U4 through the CRD system to request licensing under the investment advisor.

Some state securities regulators may require the registration of additional branch office locations of the investment advisor if investment advisory business will be conducted from locations other than the investment advisor’s principal office and place of business. Although not very common, some state securities regulators may charge a fee to license each additional branch office location of the investment advisor. These investment advisor branch fees typically range from $25 – $100.

The investment advisor registration fees and investment adviser representative licensing fees already discussed are the standard fees that almost every investment advisor submitting and application for registration can expect to pay. In addition to these fees, an investment advisor may incur additional costs if it chooses to engage a compliance professional to assist them with the preparation of the initial documents that are required to be submitted as part of the investment advisor registration application. These professional fees can vary greatly depending on the compliance professional an investment advisor selects. When trying to decide whether or not to pay a compliance professional to assist with the investment advisor registration process, an investment advisor should consider the following.

What is my time and sanity worth?

How quickly do I need to get the investment advisor registration process completed?

Do I have a good enough understanding of the requirements for investment advisor registration as well as the disclosure requirements?

Generally, paying the extra cost to have a seasoned compliance professional assist the investment advisor through the registration process is well worth the cost in the long run. Although we can’t speak for all compliance consultants, the consultants at RIA Compliance Consultants are already familiar with the investment advisor registration process, the various registration documents that must be submitted as part of the registration process, the terms used in the various registration documents, and the types of disclosures required by the various securities regulators. Investment advisors must keep in mind that some of the documents that are being prepared as part of the investment advisor registration process not only serve as the application for registration, but these investment advisory documents may also be available for public viewing through the Investment Adviser Public Disclosure (“IAPD”) system and will serve as the disclosure document that the investment advisor is required to provide to all clients. An investment advisor needs to make sure that these investment advisory documents are prepared in a manner that will not just allow the investment advisor to register with the securities regulator but pass regulatory scrutiny in the future. If you would like to gain a better understanding of the investment advisor registration process, please register to attend our webinar, “How to Become a Registered Investment Advisor,” presented by RIA Compliance Consultants. Click here to listen to the previously recorded session.

There are a variety of factors that can affect the overall cost to initially start an investment advisor. However, based on our pricing model for turnkey registration services, an investment advisor with a basic business model, that needs to be registered in one state, and only has one investment adviser representative that needs to be licensed can expect an average investment advisor set-up cost of $2,600-$3,600, which includes our consulting fees and the firm’s state registration/notice filing, rep licensing and IARD system fees previously referenced. (Please understand that our written quotes to prospective clients only cover the fees for our consulting services.)

If you are interested in obtaining an initial quote for RIA Compliance Consultants to assist you with the investment advisor registration process, click here to schedule a time to speak with one of our compliance consultants.

Annual Investment Advisor Compliance Program

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*RIA Compliance Consultants, Inc. (“RCC”) is not a law firm and does not provide legal services. A compliance consulting relationship with RCC is not provided those legal and professional protections that normally exist under an attorney-client relationship. For more information, please visit our Disclosures webpage.

The determination to use a third-party compliance services provider is an important decision and should not be based solely upon advertisements or self-proclaimed expertise. A description or indication of limitation of our compliance services does not mean that an agency or board has certified RCC as a specialist or expert in investment advisor compliance. All potential clients are urged to make their own independent investigation and evaluation of RCC.